E.ON renegotiating supply contracts with four suppliers - CEO
German utility E.ON is optimistic it will be relieved of the remaining 50% of "risk" in its long-term natural gas contracts within the next 12 months, CEO Johannes Teyssen said in a conference call on Wednesday.
E.ON is negotiating with four smaller natural gas suppliers about the company's long-term contracts at the moment, Teyssen said. "We've already renegotiated our portfolio, but we did not find structural solutions with every producer. Next time, we will not put extra money on the table, for absolutely no one." The CEO added the company's renegotiations of some gas-supply contracts had already led to a reduction of its risk by 50%, which had a positive effect on the company's earnings in 2012.
While EON's net income increased substantially in 2012, partly because of the renegotiation of gas-supply contracts and the receding impact of the nuclear phase-out in Germany, the company still has concerns about its business.
According to preliminary figures published on Wednesday, EON's net income rose to €4.3bn in 2012, up from €2.5bn in 2011. E.ON also expects a 16% increase in its final earnings before interest, tax, depreciation and amortisation (EBITDA) for 2012 to €10.8bn. For 2013, the German giant estimates its EBITDA to be between €9.2bn-9.8bn.
At the beginning of July 2012, E.ON and Gazprom settled a protracted arbitration dispute over the pricing of gas supplied under long-term contracts, including retroactive adaptation of pricing conditions for the price review period since Q4 2010 (see ESGM 3 July 2012).
While taking stock of 2012, Teyssen said power and gas demand in Europe had substantially decreased in the past years. He added that low coal prices and unviable gas-fired plants were still damaging E.ON's bottom line. EON previously had stated it wants to shut down unviable gas-fired plants in Germany, for example, Irsching 5 in the south of the country. "Half of Irsching belongs to municipal utilities that do not want to continue burning their money, and we absolutely understand them. We've given the politicians enough time to find a solution, and in March we will see what the outcome is. If we decide to decommission Irsching, we will announce this in due course," Teyssen said at the press conference. He did not exclude other power plants from the list of possible closures in the future, but declined to give any details.
E.ON has already announced that it will decommission 11GW of gas and power capacity until 2015 across the whole of Europe. MH
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